NASDAQ Velocity and Forces: An Interactive Visualization of Activity and Change by Huyen Tue Dao, Adam Bazinet, Robin Berthier and Ben Shneiderman

NASDAQ Velocity and Forces: An Interactive Visualization of Activity and Change by Huyen Tue Dao, Adam Bazinet, Robin Berthier and Ben Shneiderman

volume. We wanted to provide an overview of stocks on the NASDAQ and give 
users a useful tool to discover events and review the behavior of the market. 
1.1 Stock Market Activity 
Stock markets basically take one of two forms today: physical trading floors and 
electronic markets. Exchanges that have a physical trading floor, like the New York 
Stock Exchange (NYSE), have various trading posts at particular locations for trading 
of a particular company’s stocks and use an auction system to determine price. 
Brokerage firms submit orders via brokers on the trading floor who go to the 
appropriate trading post to make their buys and sells. At each trading post is a 
member of the exchange known as a specialist. The specialists facilitate trades by 
matching buy and sell orders, buying shares if there is no current buyer, and selling 
shares if there is no current seller. His/her purpose is to help keep the market flowing 
smoothly and continuously. Even with this high level of face-to-face interaction, 
markets with physical trading floors are still highly computerized. 
Electronic markets, like NASDAQ, are fully-automated systems. In electronic 
markets, brokers contact dealers, known as market makers, in order to determine the 
best prices for a particular stock depending on if the broker wanted to buy or sell 
stocks. The market maker, like the specialist, also responds to current conditions in 
the market; however, there are several market makers per stock and their goal is 
profit. If there is predominantly selling occurring, then the market maker lowers the 
bid price, thus lowering the stock price. If more investors are buying than selling, the 
market maker raises prices for shares in his own inventory, thus raising the stock 
price. Market makers are continually adjusting prices depending on the volume 
traded as well as trends towards buying or selling. The goal of market makers is to 
maximize the price a seller pays and minimize the price that he must pay. The 
difference between the bid price and the sell price is known as the “spread” and is 
generally on the order of cents. In this market, the same stock can have different 
prices under different market makers at the same time. 
1.2 The NASDAQ Stock Market 
The NASDAQ stock market is an American, electronic stock market listing 3,300 
companies. The first electronic stock market in the world, NASDAQ currently has 
the largest trading volume of the American market at around 2 billion shares per day 
[NASDAQ, 07]. While trading in a variety of companies in various sectors, 
NASDAQ has become known for being an exchange heavy in technology and lists 
some of the biggest high-tech companies in the United States: Microsoft (MSFT), 
Apple (AAPL), Google (GOOG), and Intel (INTC), among many others. Being an 
electronic stock market, NASDAQ executes trades through a computer and 
telecommunications system. However, it does have a physical presence in the form of 
the NASDAQ MarketSite in New York's Times Square. MarketSite constantly 
streams financial information on wall-size displays and contains a TV studio for 
broadcasting market news. 
1.3 Market Noise, Velocity, and Forces 
While stock markets become increasingly high-tech and many markets start closing 
their physical floors, there are proponents who argue for the advantages of physical 
trading. Specifically, they support the high degree of interpersonal interaction as 
a way of enforcing trading rules and allowing for exchange monitoring which helps 
maintain the integrity of the market. Further, studies have shown that the sound level 
on physical trading floors correlates with price changes. In fact, Coval and Shumway 
(2001) state that such information originating from human interaction cannot be fully 
replicated by electronic markets. At the same time, markets as a whole have been 
adding new technology and upgrading their systems and adding more complex data 
measures in order to capture more information about electronic trades. And while the 
entirety of information given by human interaction may not be attainable, there is a 
broad range of important information that can be provided, thus allowing for forecasts 
to be made. 
NASDAQ has tried to compensate for the lack of physically-based information 
by the creation of two data products called Market Velocity and Market Forces as part 
of their Market Analytix information service. Market Velocity aims to capture levels 
of pre-trade activity. It measures the frequency and share volume of orders that have 
been sent to the trading system, attempting to capture the noise and activity on a 
physical floor that indicate changes in direction, momentum, or liquidity in a stock. 
On a physical floor, if several brokers are seen crowding around a single post, 
frantically trying to place orders, then there is a definite sign of activity in that stock. 
By looking at how aggressively orders are being made, Market Velocity tries to 
capture this same increased level of activity. As a complement to Market Velocity, 
Market Forces utilizes the same information but breaks down orders by whether they 
are sell orders or buy orders. At a given time, Forces quantifies whether traders are 
predominantly buying or predominantly selling and the momentum in either direction. 
The main data feed that comprises the Velocity and Forces data is an 
accumulation of buy and sell orders per stock per time of day. Buy and sell order 
quantity contribute to a running total of Velocity for that stock and time, and so 
Velocity can be seen as the total volume in orders. Forces are kept as a ratio of buy 
volume to sell volume for that stock and time. A 21-day running average of previous 
Velocity values per stock and time of day gives an expected level of activity for 
comparison. It is important to note that Velocity and Forces measure volume in 
orders and not trades. Orders are requests for a buy and sell, while trades are 
completed orders. 
1.4 Visualizing Velocity and Forces 
Market Velocity and Forces are part of the Market Analytix information service and 
thus generally provided as a data feed; however, there are a few examples of the 
Velocity and Forces information being used in visualizations. The Experimental 
Market Information site previously provided graphs showing expected and actual 
Velocity and separate graphs showing Forces. However, these are no longer being 
updated with real-time data. The NASDAQ Marketsite currently has visualizations 
for Market Velocity and Market Forces per company (figures 1-2). 

NASDAQ Velocity and Forces: An Interactive Visualization of Activity and Change by Huyen Tue Dao, Adam Bazinet, Robin Berthier and Ben Shneiderman